Maximizing Cost Per Acquisition (CPA) — Here’s What Experts Have to Say

In the paid acquisition world, clicks on your ads can seem like the holy grail. But to accurately measure my content’s converting capabilities, I’ve found cost per acquisition (or CPA) to be a much more valuable metric.

If you really think about it, clicks only tell you if people arrive at your content — not if they stay and, better yet, buy into your product or service. Monitoring cost per acquisition, on the other hand, has helped me determine whether my content is engaging enough to convert.

Here’s what I’ve learned about what exactly CPA is, how to calculate cost per acquisition, how the bidding process works, and some key principles for crafting creative and convincing ad copy.

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Many marketers prefer the cost-per-acquisition pricing model because they can define an acquisition before they start advertising and only pay when their desired acquisition or action occurs.

For example, if you define acquisition as submitting one specific form, you’ll pay each time that form is submitted — but not when visitors click on your ad and simply view the form.

I like this model because it allows you to stretch your advertising budget just a bit farther. (Check out these free templates to help you manage your budget!)

This pricing model is used in a handful of paid marketing mediums, including:

Why is cost per acquisition important?

If you’re considering pay-per-click advertising, you need to understand CPA. It’s an important metric to help you plan your advertising strategy.

To help you better understand why, I thought it would be useful to share insights from marketing and advertising specialists.

Here’s what they said when I asked, “Why is cost per acquisition important?”

1. Plan your marketing budget.

Ross Kernez, founder of SEO Meetup and CEO of Stealth, told me that your CPA can help you better plan your multi-channel marketing strategy, including PPC, social media, and content marketing.

Kernez said, “Knowing your CPA enables better allocation of marketing budgets. It helps marketers identify which channels are more cost-effective in delivering results, allowing them to focus resources on high-performing campaigns while cutting back on underperforming ones.”

2. Improve your conversion rate.

Calculating your cost per acquisition can also help you identify strengths and weaknesses in your marketing strategies. Then, you can trim away efforts that aren’t pulling their weight and focus more of your time and resources on campaigns that bring the most conversions.

Cristina Muchi, founder and CEO of Upway Marketing, put it this way.

“CPA is the yardstick for measuring how efficiently the marketing dollars are working for the brand. Whether the company is using Facebook ads, Google search, or email marketing, every platform and campaign incurs a cost. CPA shows us which strategies are truly delivering conversions without burning through the budget.”

3. Easily scale your efforts.

Alfred Goldberg, president of Absolute Marketing Solutions, told me that calculating your CPA helps eliminate guesswork in marketing and makes it easier to scale your efforts.

Goldberg said, “You can confidently scale your campaigns when you know your CPA is profitable. If you’re spending $10 to get a customer who spends $50, why wouldn’t you increase your ad budget? CPA lets you grow without the guesswork.”

How to Calculate Cost Per Acquisition

To calculate your advertising campaign’s CPA, take your total advertising spend and divide it by the number of acquisitions generated.

Here’s what that looks like: Let’s say you have an advertising budget of $5,000. However, you only spend $2,500 and generate 1,200 conversions.

Your math will look something like this:

CPA= 2,500/1,200

This gives you a CPA of $2.08. In other words, each conversion costs around two dollars of your advertising budget.

(Alternatively, you can use the Return on Ad Spend (ROAS) calculator to quickly crunch these numbers and a few other important metrics!)

Keeping tabs on your cost per acquisition — and other key indicators of successful marketing — is an essential part of continuing to grow your marketing efforts. That’s why I recommend including CPA in your monthly marketing reports, to ensure you’re regularly checking in and evaluating whether your ad spending is being put to optimal use.

Pro tip: If you don’t already create monthly marketing reports, check out these templates to get you started.

What is a good cost per acquisition?

Now that you know why CPA matters and how to calculate yours, you might be wondering what a good cost per acquisition looks like. Or, in other words, what numbers should you aim for?

I’ll let you in on a secret: a “good” cost per acquisition varies by industry. So, a $5 CPA might be perfect for one but entirely too high for another.

Still, while there’s no hard-and-fast rule, there are some guidelines to keep in mind I like to keep in mind.

Keep It Low

Ideally, you want to keep your CPA as low as you can while still hitting your desired conversion rates.

I like how Randall Yates, CEO of The Lenders Network, explains it. Yates says, “If you can keep your CPA low, you’re in a position to thrive because every dollar spent brings in more value. It’s like a well-oiled machine — you’re reaching your ideal customers efficiently, and that’s how you scale a business.”

On the flip side, Yates adds that if your CPA is too high, “it means your marketing efforts aren’t hitting the mark, and you’re throwing money at a problem without getting the returns. I’ve seen businesses struggle and fail because they couldn’t get their CPA under control. So, for me, lowering CPA isn’t just important — it’s make or break.”

Maintain a 3 to 1 Ratio

To avoid spending too much on advertising, a good rule of thumb is to aim for a 3 to 1 ratio. This means that for every three dollars you spend, you make one conversion.

For example, if I’m spending more than $3 per conversion, I’ll want to evaluate my marketing strategies to see what’s not working and adjust accordingly.

If I’m spending way less than $3 per conversion, on the other hand, it may be time to increase my ad spend a little and scale my marketing efforts.

Ask Around

If you’re still not sure whether you’re hitting a healthy CPA — or if you’re just starting out and don’t have much data of your own to analyze — try reaching out to other marketers in your industry to compare notes.

This will help you get a better understanding of your CPA and if it’s too high or low for your industry. Plus, it’s a great way to expand your network and potentially even get some insider tips from people with more experience in your field.

How Cost Per Acquisition Bidding Impacts Ad Rank

Cost-per-acquisition bidding doesn’t work quite like a typical auction. Advertising platforms like Google want to level the playing field when it comes to leveraging the size of their reach. So, instead of the highest bidder always winning the auction, these platforms award the top ranking for each keyword to the bidder with the highest ad rank.

Here’s how it works.

• Google assigns each ad a quality score. Your quality score depends on your page’s relevance to the keyword, user experience, and click-through rate.
• Your quality score is multiplied by your maximum CPA bid. This calculation gives you your ad rank.
• Low-quality content must pay more to rank higher. To discourage bad advertisers from advertising bad content, those with low-quality scores will usually only acquire a high ad position if they pay a huge CPA bid. Otherwise, they’ll have to settle for the bottom of the ad rankings.

This means organizations can’t acquire the top ranking for any keyword they want just because they have the biggest ad budgets, which is a relief for smaller marketers like me. Their content has to be engaging, and because of that, you and I can fairly compete with them.

Target CPA Bidding

To generate as many conversions as possible within the limits of your advertising budget, consider using Google’s target CPA bidding.

Target CPA bidding leverages machine learning to:

• Analyze your campaign’s historical conversion data.
• Recommend an optimal average target CPA.
• Automatically optimize all your eligible bids to meet the average target CPA you set for all your campaigns.

If you use target CPA bidding, some of your conversions may cost more than others because your quality score or the competition in your ad auction might fluctuate. However, Google will try to keep your actual cost per acquisition as close to your average target CPA as possible.

Setting a lower target cost per acquisition is a good starting point for lowering your CPA costs and maximizing your ad spend. However, CPA isn’t the only metric that determines the effectiveness of your advertising.

In this section I’ll take a look at some other tweaks you can make to your marketing strategies to make the most of your efforts and resources.

1. Write compelling ad copy.

Since your ad’s quality score plays such a huge role in securing a top ad ranking, one of the best ways to optimize your CPA costs is to craft compelling ad copy.

When you sit down to write an ad or landing page copy, your goal should be to write something so captivating that it can grab the attention of a distracted consumer who has Netflix on in the background while they scroll through TikTok.

One way to do this is by selling a feeling, not a product — or, in other words, by selling benefits instead of features to drive emotion-based action.

For example, I wouldn’t just say, “This computer has twelve hours of battery life.” Instead, I’d make a more compelling argument: “With 12 hours of uninterrupted power, you can create, work, or explore the web all day, at your desk or on the go.”

2. Prioritize customer retention.

It may seem obvious, but it bears stating anyway: Acquiring new customers is often more costly than retaining existing ones.

What’s more, repeat customers tend to generate more revenue over their lifetime compared to one-time purchasers. So, by focusing on customer retention, you can increase the customer lifetime value (CLV) of your customer base.

Some of the best ways to increase customer retention include:

• Checking in with your customers.
• Providing targeted support.
• Building a solid relationship with your customers.

By focusing a majority of your marketing efforts on customer retention, you can leverage the investment you’ve already made in acquiring those existing customers, reducing the need for additional acquisition spending. This ultimately leads to a lower CPA.

3. Enhance your landing pages.

Just because you’ve crafted an attention-grabbing ad doesn’t mean your work is done. You still need to design a compelling landing page that clearly conveys the value of your offer.

Here are some ways I like to do that:

• Pique your audience’s curiosity with an intriguing headline and subheading.
• Scrap any external links from your landing page so visitors can only leave your paid acquisition funnel if they exit or convert.
• Try using videos to engage your audience and quickly explain the value of your offer.

Pro tip: For even more help optimizing your landing pages to drive revenue, check out HubSpot’s Marketing Hub.

4. Leverage your CRM to prioritize high-quality leads.

The power of a CRM lies in its ability to centralize and manage your leads. By organizing leads based on their stage in the sales cycle, you can prioritize your efforts on those with the highest potential to convert.

As a result, you can avoid wasteful spending on leads that are less likely to convert, leading to a lower CPA overall.

For best results, I recommend taking the time to analyze how your leads interact with your sales funnel and CRM. This can help you identify sticky points that might lead to customer loss.

Pro tip: Try out HubSpot’s free CRM to jumpstart this process.

5. Conduct market research regularly.

To acquire more customers and lower CPA costs, you need to understand your audience. After all, how can you speak to your audience if you don’t know who they are? That’s where market research comes in.

Market research helps you gain insights into the needs, preferences, demographics, psychographics, and behaviors of your target audience. This information enables you advertise on the right platforms and refine your targeting perimeters.

Plus, it helps you adjust your messaging to resonate with the right people. This, in turn, increases the relevance of your ads and content, resulting in higher engagement, click-through rates, and conversions.

If you aren’t sure where to start your market research, check out social media platforms and forums like Reddit. Reading posts from people in your target audience will help you learn about their wants, needs, and pain points.

Pro tip: You guessed it — HubSpot also has a free market research kit with templates and planning docs to help.

Chase conversions, not clicks.

Marketers will chase vanity metrics until the end of time. If you’re like me, you might feel pressured to do the same — especially when your peers clamor on about their astronomical growth in views or clicks.

But, as great as ad clicks are, a lead only counts if it converts to a sale. When you feel tempted to obsess over your click counts, remember that the goal in marketing is persuading visitors to take your desired action.

So incentivize your brand to craft ad content that resonates with your audience, because that’s what keeps people on your page and prompts them to act. And make conversions, not clicks, your carrot.

Editor’s note: This post was originally published in May 2019 and has been updated for comprehensiveness.